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Other real estate owned

Your mortgage lender will want to know if you have any other property loans not listed on your credit report.

• If you are listing a property as having no mortgages, the lender will want confirmation by getting a property profile from a title company.
• If you’re listing a rental property with income on your application, but either show no income from that property on Schedule E of your tax return or are taking a mortgage interest deduction for that property as a second home, lenders will want an explanation—which they may not accept.
• If you want to use your rental income to qualify, remember that lenders will use only 75% of the current monthly rental income less expenses.

Note: Lenders have become careful about scrutinizing second home purchases. They want to avoid providing a relatively low, second home interest rate to a borrower who is really buying an investment property. The second home has to make sense—especially its location and amenities. Lenders are also on the lookout for people buying a property as a primary residence when their intention is to use it as a rental. If you are buying down (purchasing a property whose value is less than the one you currently own), buying a 2-4 unit property as owner-occupied, or already have more than one investment property, you may have to clearly explain your reasons for claiming the new property as your primary residence.